Do any states ban Medicaid-compliant annuities? If so, which states? Or do states limit the amount of the annuity?
No, there are not any states that ban Medicaid-compliant annuities. (Medicaid-compliant means that the Medicaid agency allows this type of annuity and that it does not jeopardize the eligibility of a Medicaid applicant / beneficiary). Furthermore, the amount of the annuity is not limited by any of the states.
Also called Medicaid annuities or Medicaid friendly annuities, this type of annuity provides a way for Medicaid applicants to reduce their countable assets by converting them into a stream of income. (Remember, in order to be eligible for long-term care Medicaid, an applicant must have limited assets. This amount is usually $2,000, although state specific asset limits can be found here. When one has assets over the limit, they must be “spent down” in order for an applicant to become asset eligible. Purchasing an annuity is one way to do so without violating Medicaid’s look back period).
For an annuity to be Medicaid-compliant, there are specific rules that must be met. Two such rules are that the annuity must be irrevocable (the terms of the annuity cannot be cancelled and the lump sum of money returned) and immediate (the payments start right away). There are also additional rules, which can be found here. Please note that the rules surrounding Medicaid-compliant annuities do vary based on the state in which one resides. This means that one must exercise caution when purchasing a Medicaid-compliant annuity, as violating the rules in one’s state can result in Medicaid denial.
Another consideration, for single long term care Medicaid applicants, is that the income from a Medicaid friendly annuity is counted towards Medicaid’s income limit. If the extra income puts the individual over the limit, he / she can be denied Medicaid eligibility. For married couples, in which there is a non-applicant spouse who is receiving the annuity payments, the income will not count towards the Medicaid applicant’s income limit.
When considering a Medicaid-compliant annuity, it is best to seek the counsel of a Medicaid planner. Not only are these professionals very knowledgeable when it comes to state specific rules, but they can also take one’s specific circumstance into consideration and determine if an annuity is the best option. Find a Medicaid expert here.